UNITED STATFS TAX COURT

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122 T.C. No. 1

LES

UNITED STATFS TAX COURT

NIELD AND LINDA MONTG MERY, Petitioñers v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 16864-02L.

Filed January 22, 2004.

Ps filed a joint Federal income tax return for the

t-axable year 2000 reporting total tax of $2, 831, 360

and tax due of $T96,006.

Ps failed to remit the latter

amount with their tax returri.

R accepted Ps' tax

keturn as filed and asse:ssed the tax reported therein.

Sec. 6201(a) (1), I.R.C. R issued to Ps a final. notice

>f intent to levy, and Ps filed with R a request for a

ollection due process hearing under sec. 6330, I.R.C.

In a subsequent telephone contrersation between Ps'

counsel and R's Appeals officer, Ps asserted that they

1 ad overstated the total tax on their original return

for 2000 and indicated that they intended to submit an

amended return showing that hey were due a refund for

that year. R issued to Ps a final notice of

letermination in which he. determined that Ps were not

ntitled to challenge the amount of their tax liability

n the administrative proceeding, citing sec.

6330 (c) (2) (B), I.R.C.

Ps filed with the Court a timely

petition for. review of R's détermination.

R filed a

dotion for Summary Judgmènt.

Ps opposed R's motion.

SERVED JAN 2 2 2004

Held: R's Motion for Summary Judgment will be

denied. Sec. 6330(c) (2) (B), I.R.C., permits Ps to

challenge the existence or amount of the tax liability

reported on their original tax return because Ps have

not received a notice of deficiency and have not

otherwise had an opportunity to dispute the tax

liability in question.

Duncan C. Turner and Brian G. Isaacson, for petitioners.

Glenn P. Thomas and Julie L. Payne, for respondent.

OPINION

DAWSON, Judge:

This case was assigned to Chief Special

Trial Judge Peter J. Panuthos, pursuant to the provisions of

section 7443A(b) (4) and Rules 180, 181, and 182.1

The Court

agrees with and adopts the opinion of the Special Trial Judge,

which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

PANUTHOS, Chief Special Trial Judge:

This matter is before

the Court on respondent's Motion for Summary Judgment, filed

pursuant to Rule 121.

As explained in detail below, we shall

deny respondent's motion.

Background

On or about October 18, 2001, petitioners filed a timely

1 Section references are to the Internal Revenue Code, as

amended.

Rule references are to the Tax Court Rules of Practice

and Procedure.

joint Federal income tax return

or the taxable year 2000 on

whict they reported total tax of $ ,831,360,.total payments of

$2, 636, 723, and tax due of: $194, 37 plus _an estimated tax ~penalty

of $1,369, interest due on the ur paid balance of $9,704, and a

penalty for failure to pay of $7,785, for. a total amount due of

$213, 495.

Petitioners failed to remit the amount due with their

tax return.

Respondent accepted the tax return as filed and

assessed the . amount reported therein.

Respondent did not audit

petitioners' tax return for 2000 and did not send petitioners a

notice of .deficiency for.2000. . .

n March 19, 2002, respondent issued to petitioners a Final

Notice--Notice of Intent to Levy

nd Notice of Your Right to a.

Hearir g with regard to their unpaid tax for. .2000.,

The notice

stated that petitioners owed tax, penalties, and interest

totaling $222,315.34.

Cn April 18, 2002, petitione s submitted to respondent a

Form 12153, Request for, a Collectioh Due Process Hearing.

Petitioners' request for an administrative hearing stated in

pertinent part: .

The taxpayer -has a good tracld record of paying his

taxes timely in appropriate amounts, as evidenced by

the 1.997-1999 tax returns * * *. However, in tax year

2Ò00, the taxpayer had an extraorêlinary tax liabïlity

($2,831,360) due to his exefcise of several incentive

and nonqualified stock options and the application of

the AMT rates. The taxpayer was able to pay $2,636,723

0:E the tax liabili=ty, but., unfortunately, the value of

the -stock received plummeted before year'end 2000 and

is now essentially. worthless. Thus, the remaining tax

liability is currently thousands of times higher that

the value of the asset received. The taxpayer is

working diligently and in good faith with various

professional advisors to evaluate the situation and

remedy the outstanding tax liability.

Petitioners also stated that (1) they intended to prepare and

submit an amended income tax return for 2000 that would reflect

that they were entitled to a refund for that year; and (2) in any

event, the parties should explore alternatives to the proposed

levy including an installment agreement, an offer in compromise,

posting a bond, or substitution of other assets.

On July 2, 2002, Appeals Officer Jerry L. Johnson wrote to

petitioners to inform them that he had scheduled their Appeals

Office hearing for July 25, 2002.

Appeals Officer Johnson's

letter stated in pertinent part:

As explained in the above mentioned code sections and

related documents, a taxpayer may dispute the

underlying liability in a collection due process

hearing only when a notice of deficiency was not

provided to the last known address of the taxpayer, or

where the taxpayer did not otherwise have an

opportunity to dispute the tax.

Since that is the case

here, you will have the opportunity to discuss the

liability at the hearing.

In that regard, if you plan

to present or discuss new material, please send me

copies at least five days before our meeting.

On July 22, 2002, Appeals Officer Johnson had a telephone

conversation with·petitioners' representative.

During the

conversation, petitioners' representative stated that, through

the misapplication of complex statutory provisions, petitioners

had overstated their tax liability for 2000 on their original

return and that they intended to submit an amended income tax

retusn for 2000.

Although the'parties agreed that spetitioners

woulc be permitted to submit an ámended r.eturn, the parties did

not set a deadline 'for the submission of such amended return.

On Séptember 26f 2002, without any further communication

bÀtween thevparties, the Appeals Office issued to petitioners a

Notice of Determination Concerning Collection Action (s) Under

Secti n 6320 and/of 6330.

The notice,of. determination, signed by

Appeals'Team,Manager Debra M. Brush, stated in pertinent part:

"The Taxþayer has indicated he would file amended returns to

mitigi te the liability, but · such has not been done ·in a

reasor able time, and the mere filÈng of suchy claim does not

guarar tee that the claim should be paid;. -Therefore, the levy

should be allòwed, to proceed."

As of. September 26, 2002,

petitioners had not submitted-to respondent an amended income tax

returb for 2000.

However, on Octòber 11, 2002, petitioners

submitted to respondent an amended income . tax .return . for 2000

which reflects, that; petitionèrs are due a refund of $519,087.

On October 28,-:2002, petitioriers filed with the Court a

Petition for Irien or Levy Action Under Section 6320 and/or 6330.2

The so Le issue raised in the petitiön is a challenge to the

amount of petitioners' sunderlying tax liability for 2000.

2002.

The 'petiition was timely mailed to tihe Court on Oct. 25,

Secs. 6330 (d) ; 7502 (a) .

After filing an answer to the petition, respondent filed a

Motion for Summary Judgment.

Respondent maintains that there is

no dispute as to a material fact and the Court should enter

judgment as a matter of law sustaining the notice of

determination dated September 26, 2002.

Respondent argues that

petitioners are barred from challenging the existence or amount

of their underlying tax liability for 2000 in this collection

review proceeding on the ground that the tax liabilïty in

question was "self-assessed" on petitioners' original tax return

pursuant to section 6201(a) (1).

Petitioners fil.ed an Objection

to respondent's motion.

This matter was called for hearing at the Court's motions

session held in Washington, D.C.

Counsel for both parties

appeared at the hearing and made oral argument.

Discussion

Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.

v. Commissioner, 90 T.C. 678, 681

(1988).

See Florida Peach Corp.

Summary judgment may

be granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law."

Rule 121(b); Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), -affd. 17 F.3d 965

Cir. 1994); Zaentz v. Commissioner, 90 T.C., 753, 754

Naftel v

Commissioner, 85 T.C.

54027,

529 (1985),.

(7th

(1988);

The moving

party bears the .burden of provincj that there is. no genuine issue

of material facit,. and factual inferences will be read .in a manner

most favorable to the party opposing summary judgment.

Dahlstrom· v. Commissioner, 85 .T.C. 812, 821

Commi sioner, 79 T.C. 340, 344

See

(.1985);,Jacklin v.

(1982).

e are satisfied from our rekiew of the record that there is

no genuine issue as to any materihl fact.

contr ry to respondent's· position

However, we conclude,

that petitioners may challenge

the anount of their underlying:taù liability =in this proceeding.

Consecuently, we shall deny respondent's motion.

Section. 6331(a) provides tha

if any person liable to pay

any tax neglects or refuses to. paÿ such tax within .10 ,days after

notice and demand forspayment, the Secretary is authorized;to

collect such tax by levy ·on the person's property.

Section

6331(d) provides that at least 30 kdays before enforcing

collection by levy on the person'

propertyg , the Secretary is

oblige

to provide the person with a final .notice of intent to

levy,

ncluding notice of the administrative appeals available to

the pe son.

Séction .6330 generally provides that the Commissioner cannot

proceed with collection by levy un il the person has been given

notice and the opportunity for an administrative review of the

matter (in the form of an Appeals Office hearing) and, if

dissatisfied, with judicial review of the administrative

determination.

See Davis v. Commissioner, 115 T.C. 35, 37

(2000); Goza v. Commissioner, 114 T.C. 176, 179

(2000) .

Section

6330(d) provides for judicial review of the administrative

determination in the Tax Court or a Federal District Court, as

may be appropriate.

Section 6330(c) prescribes the matters that a person may

raise at an Appeals Office hearing.

Section 6330 (c) (2) (A)

provides that a person may raise collection issues such as

spousal defenses, the appropriateness of the Commi-ssioner's

intended collection action, and possible alternative means of

collection.

See Sego v. Commissioner, 114 T.C. 604,

Goza v. Commissioner, supra.

609

(2000);

In addition, section 6330 (c) (2) (B)

establishes the circumstances under which a person may challenge

the existence or amount of his or her underlying tax liability.

Section 6330(c) (2) (B) provides:

SEC. 6330 (c) (2) .

Issues at Hearing . --

(B) Underlying Liability.--The person may also

raise at the hearing challenges to the existence or

amount of the underlying tax liability for any tax

period if the person did not receive any statutory

notice of deficiency for such tax liability or did not

otherwise have an opportunity to dispute such tax

liability.

Respondent'has . promulgated interpretative regulations

related to section 6330 (c) (2 (B)

Sect-ion 301.6330-1(e), Proced.

& Adirin. Regs., provides in pertinent part:

(e) Matters considered at CDP hearing-- (1) In general.

* * * The taxpayer also may ;raise challenges to the

existence or amount of the tíax liability specified. on

the CDP Notice. for any tax period shown on the CDP

Notice if the taxpayer .did r ot receive a statutory

notice of deficiency for that tax liability or did not

ptherwise have an opportunity to dispute that tax

liability.

Secti n .301.6330-1(e) (3), Proced. & Admin. .Regs., provides in

perti ent part:

(3) Questions and answe s.

The questions and

answers illustrate the provisions of this paragraph (e)

is follows:

* * *

Q-E2.. When is a taxpayer entitled to challehge

t he existence or amount of the tax liability specifie.d

n the CDP Notice?

A-E2. A taxpayer is entitled to challenge the

existence or amount of the tax liability specified in

the CDP Notice if the- taxpayer did not receive a

statutory notice of deficiency for such liability or

did not otherwise have an opportunity to dispute such

liability.

Notably, respondent' s regulations do not expressly bar a person

from c allenging the existence or amount of tax previously

reported due on a tax return.

In any event, respondent's position in this case is

articulated in his motion as foilows:

Respondent interprets section 6330 (c) (2) (B) to

mean that a taxpayer can challenge.. only those

li.abilities asserted by respondent that differ in

amount from the taxpayer's self-determination.. By,

-10 granting taxpayers a right to contest the existence or

amount of an underlying tax liability, Congress was

concerned with tax liabilities asserted by respondent,

rather than those originally computed and reported by

the taxpayers themselves.

This concern is evident in

the phrasing of section 6330 (c) (2) (B), which permits a

taxpayer to contest an underlying tax liability in the

event that he or she has been denied a prior

opportunity to contest that liability in the form of a

"statutory notice of deficiency" or "otherwise." It is

nonsensical to permit taxpayers whose tax liabilities

are self-determined to contest under section 6330 the

liabilities they computed, voluntarily reported and

declared to be correct under penalty of perjury.

Respondent further asserts that there is no suggestion in the

legislative history underlying section 6330 that Congress

intended to permit taxpayers to challenge taxes that were "selfassessed" on a tax return.

Finally, respondent maintains that,

inasmuch as section 6330 constitutes a waiver of sovereign

immunity, the provision should be narrowly construed in the

Commissioner's favor.

Before proceeding, we briefly review the principles of

statutory construction that guide our analysis.

It is well

settled that in interpreting a statute, we start with the

language of the statute itself.

Consumer Prod. Safety Commn. v.

GTE Sylvania, Inc., 447 U.S. 102, 108

(1980).

If the language of

the statute is plain, clear, and unambiguous, we generally apply

it according to its terms.

Inc., 489 U.S. 235, 241

41, 59 (1995).

United States v. Ron Pair Enters.,

(1989); Burke v. Commissioner, 105 T.C.

In Huntsberry v. Commissioner, 83 T.C. 742, 747-

748 (1984), we stated that "where a statute is clear on its face,

we wóuld require unequivocal evidence of legislative ·purpose

befo e construing the statute· so f as to override the plain meaning

of the words used-therein."

However, if a statute "is *ambiguous

or silent, we may loök to the statute's legislative history .to

determine congressional intent."

494, 503. (2002)

(citing Burlingtön N. R.R. v. Okla. Tax Commn.,

481 U.S. 454, 461

120 T.C. 69, 89

Ewina v. Commissioner, 118 T.C.

(1987)); see Wells Farao .& .Co. v. Commissioner,

(2003); Allen v. Commissioner, 118 T.C. 1, 7

(2002) .

Turning to sectiön 6330 (c) (2) (B) , the provision plainly

states that a.person may challènge "the existence or amount of

the ur derlying tax liability for any tax period if the person did

not re ceive any statutory notice öf deficiency for such tax

liability or did not otherwise ha e an opportunity to dispute

such t ax liability."

The term "urhderlying tax liability" is not

defined in sections 6320 or 6330, nor is there any specific

reference'to that term in the legislative histöry -of- the

provisions-.

term

Taken ln context, it is reasonable to interpret the

underlying tax liability" a

a reference to the amounts

that the Commissioner assessed for a particular tax period.

this regard, the term "underlying tax liability" may encompass an

amount assessed following the issuance of a notice of deficiency

- 12 under section 6213(a), an amount "self-assessed" under section

6201(a), or a combination of such amounts.

Consistent with the foregoing, the plain language of section

6330 (c) (2) (B) bars a person who has received a notice of

deficiency from challenging his or her underlying tax liability

for that year (whether the liability was self-assessed or

assessed as a deficiency) in a collection review proceeding

inasmuch as the person was afforded a prior opportunity to

challenge such liability under the deficiency procedures.3

contrast, where a person has not received a notice of deficiency

and has not had a prior administrative or judicial opportunity to

challenge the amounts the Commissioner assessed, section

6330 (c) (2) (B) provides that such person may challenge the

liability as part of the collection review procedu.re.

In the present case, petitioners' underlying tax liability

consists of the amount that petitioners reported due on their tax

return along with statutory interest and penalties.

It is clear

that petitioners did not receive a notice of deficiency for 2000.

Indeed, respondent was not obliged to issue a notice of

deficiency to petitioners because the assessment in question was

3 See Naftel v. Commis,sioner, 85 T.C. 527, 531 (1985),

where we observed that in a deficiency proceeding brought under

sec. 6213(a), the Court may also consider the taxpayer's claim of

an overpayment for the year(s) in issue under sec. 6512(b) (1).

entered under section 6201-(a)r (1)

Moreover, . the tax that

. petitioners reported .due on their return is excluded f.rom the .

definition of a deficiency under section 6211 (a) .

The question that remains under section 6330 (c) (2) (B) is

wheth r petitioners "did .not otherwise. haver an opportunity . to

dispute such tax liability" for 2000.

Respondent contends that

the pl rase quoted' above should be cinterpreted to exclude persons,

such as petitioners, who have repbrted- their tax liability on .a

duly

iled tax return-.

However, respondent's. proposed

inter retation .would have the eff ct of adding terms and

conditions to section 6330 (c) (2) (B) -that are inconsistent with

the plain language of the provisi n.

had intended to preclude taxpayer

As we see it, if Congress

.from challenging in a

collection review proceeding taxes that were assessed pursuant to

section 6201(a) (1), the statute would have been drafted to

clearly so provide.

Simply put, t e plain language of the

statutë as enacted, with an emphasis on whether there was an

earlier opportunity to dispute the tax liability, provides a

broade

remedy than respondent's interpretation would allow.

Sec. 6201(a) (1) provides:

(1) Taxes shown on return. -The Secretary shall

a sess all taxes determined bÿ the taxpayer or by the

Secretary2as to which returns or lists are made -under

this title.

- 14 To date petitioners have not had an opportunity to "dispute"

their tax liability for the taxable year 2000 in any sense of the

term.

Although petitioners reported the tax liability that.is

the subject of respondent's proposed levy on their original tax

return, they now contend (and would like the opportunity to show)

that they erred in computing the tax attributable to certain

stock options that Mr. Montgomery exercised in 2000.

The record

does not reflect whether respondent has given consideration to

petitioners' amended tax return for 2000 and their claim that

their original return contained an error.

In sum, we hold that

section 6330 (c) (2) (B) permits petitioners to c.hallenge the

existence or amount of the tax liability reported on their

original income tax return because they have not received a

notice of deficiency for 2000 and they have not otherwise had an

opportunity to dispute the tax liability in question.5

5 We also observe that carving out self-assessed amounts

from the term "underlying tax liability" under sec.

6330(c) (2) (B), as respondent would have us do, does not comport

with the use of that term in sec. 6311 which deals with the

payment of tax by commercially acceptable means.

Like sec. 6330,

it is another provision of the Code relating to collection.

Specifically, sec. 6311(d) (3) (A) provides in relevant part that

"a payment of internal revenue taxes * * * by use of a credit

card shall not be subject to section 161 of the Truth in Lending

Act * * * if the error alleged by the person is an error relating

to the underlying tax liability".

Similarly, sec. 6311(d) (3) (C)

provides in relevant part that "a payment of internal revenue

taxes * * * by use of a debit card shall not be subject to

section 908 of the Electronic Fund Transfer Act * * * if the

error alleged by the person is an error relating to the

underlying tax liability".

In both instances, use of the term

(continued...)

- 15 Respondent -asserts that it 1s· nonsensical- to permit

petitioners to chällenge in a collect1on revlew proceeding the

very tax that they reported to b

due (or ,"self-determined") on ,

their original income ~tax return.

We would not characterize an

opportunity "for respondent to review the correct amount of

petitioners'- tax -liability asl nonsensical.

As discussed above,

the c ntrolling statutory language focuses on whether the person

had a prior opportunity to dispute the tax liability-and·

petitloners have not had any such opportunity.

Read int context,

and as applied in this case, sect on 6330 (c) (2) (B) extends the

substantive and procedural protec ions - of sectio'ns 6320 and 6330

to ta payers 'who may have erred *(in the Government's favor)

prepaning and filïng their tax returns

the Federal income tax laws

common.

Given the complexity of

sudh taxpayer errors may well be

We ·conclude that section 6330 (c) (2) (B) is. fairly read as

providing a remedy to such taxpayers.

Respondènt. also urges thãt t e legislative history of

section 6330 (c) (2) (B) andeprinciples e of sovereign .immunity

requir

that the provision be construed narrowly in the

Commissioner's favor.

We disagree.

We see no ambiguity in the

plain Language of section96330 (c) ( ) (B) that would ^justify resort

to the legislative history for qui ance in interpreting the

5 (. . . continued)

"underlying tax liability" in sec. 6311 patently~ificludes selfassess d amounts.

- 16 provision.

Moreover, we are not aware of any specific expression

of congressional intent in the legislative history that would bar

persons, such as petitioners, from raising a valid challenge to

the existence or amount of tax previously reported due on a tax

return.

See Huntsberry v. Commissioner, 83 T.C. at 747-748.

Considering the plain language of the statute, we find

respondent's reliance on principles of sovereign immunity equally

unavailing.

Our holding in this case advances.the policies underlying

sections 6320 and 6330.

Those sections were enacted to provide

taxpayers who have been notified that the Commissioner has filed

a lien or intends to collect unpaid taxes by levy with a final

opportunity to raise a spousal defense, offer an alternative

means of collection, and/or challenge the appropriateness of the

proposed collection action.

Moreover, as pertinent herein,

Congress provided taxpayers who are confronted with a lien or

proposed levy, but who have not had a prior opportunity to

challenge the existence or amount of the tax liability in

question, with the opportunity to do so.

In view of the

statutory scheme as a whole, we think the substantive and

procedural protections contained in sections 6320 and 6330

reflect congressional intent that the Commissioner should collect

the correct amount of tax, and do so by observing all applicable

laws and administrative procedures.

To reflect the foregoing,

An order will be issued

deüying respondent's motion for

summary i udgment .

Reviewed by the Court.

WELLS, COHEN,

SWIFT,

LARO,

FOLEY, VASQUEZ, THORNTON,

WHERRY, and KROUPA, JJ., agree with thi.s ma ority opinion.

HAINES,

- 18 WELLS, C.J., concurring:

Respectfully, I write separately

to respond to the suggestion, raised by Judge Chiechi in her

opinion dissenting and concurring in part, that respondent's

Motion for Summary Judgment should be denied on the narrow ground

that section 301.6330-1(e), Proced. & Admin. Regs., 67 Fed. Reg.

2555 (Jan. 18, 2002), is dispositive of the issue in the instant

case.

The issue before us is whether section 6330 (c) (2) (B)

permits a taxpayer to challenge in a lien and levy action in this

Court the existence or amount of tax that the taxpayer previously

reported due on his or her income tax return.

The majority

concludes, and I believe correctly so, that the plain language of

section 6330(c) (2) (B) permits a taxpayer to raise such a

challenge.

Judge Chiechi, however, agrees with the result reached by

the majority only insofar as petitioners may challenge the

existence or amount of the tax liability specified in the "final

notice".

I believe the majority, based on its interpretation of

section 6330(c) (2) (B), correctly holds that petitioners may

challenge the entire amount of tax, penalties, and interest that

respondent assessed against them for the taxable year 2000.1

Section 301.6330-1(e), Proced. & Admin. Regs., quoted in

Petitioners not only challenge the $222,315.34 amount

specified in respondent's final notice of intent to levy, but

they also contend that they overpaid their taxes in the amount of

$519,087.

full in the majority opinionµ is an interpretative regulation

. that does nothing more than stat

a gerieral proposition, to wit:

A taxpayer may challénge in a co lection review proceeding the

exi 541tence

or amount of the tax 1 ability set forth in a final

lien or levy notice -if the taxpa er (did not receive a notice of

deficïency for such liability, or did= not otherwise have an.,

opportunity to dispute such liability.

track

The regulation largely

the language of set:tion 6330 (c) (2) (B) , with the exception

that the term "underlying tax liability" contained in the statute

is in the regulation replaced by the phrase "the tax liability

specified on the CDP Notice".

Nowhere in the parties' motion or opposition or written and

oral arguments have they cited or relied upon section 301. 63301(e), Proced. & Admin. Regs.

I suggest that the reason for the

partids' failure to cite that regulation is that the proper

disposition of respondent's motio

depends upon the Court's

statutory construction of section 6330 (c) (2) (B) .

In any event, the general rule. espoused in the regulation is

in no waý dispositive of the spec fic question whether section

6330 (c) (2) (B) permits a taxpayer t o challenge the existence or

amount of tax that was reported due on the taxpayer's return.

is res ondent's position in the instant case that tax reported

due on a return and assessed by respondent under. section 6201

repres nts a unique assessment that Congress never intended to be

- 20 subject. to challenge under section 6330(c) (2) (B)

(and by

implication section 301. 6330-1 (e) , Proced. & Admin . Regs . ) .

Under the circumstances, I believe that it is incumbent upon this

Court to resolve the question the parties raised and.argued by

analyzing the controlling statutory provlslon, as opposed to

relying upon a general statement appearing in an interpretative

regulation.

FOLEY, THORNTON, and KROUPA, JJ., agree with this concurring

opinion.

-·21 LARO, J., concurring:

I agkee .with the majority opinion.

I write separately to emphasize

opin on.

wo points underlying that

1. = The Term "Underlyina Tax Liability" Is Unambiauous

The 'relevant term, "underleying tax liability", is clear and

unam iguous. and is read easily tá mean the tax liability

underlying the proposed levy.

The beginning and end of our

inquiry, therefore; must be the

tatutory text, and we must apply

the plain!meaning. of that·text.

TVA v. Hill, .437 U.S. 153,

185

n.29 (1978).; United States v. Am. Trucking Associations, 310 U.S.

534, 543

(1940) .

Only when text is

inescapably ambiguous" may

we resort to the legislative history. to discern its meaning.

Garcià v. United States, 469 U.S. 70

76 n.3

(1984) . .. The meaning

oftthe relevant term is not inescapably ambiguous.

Whereas

respoñdent essentiMly reads 'the relevant term; to mean

unde5 lying tax: deficiency"., Cong ess obviously knew how to use

the wc rd "deficiency" and presuma ly would have used that word in

the 'rålevant term had it intended the reading advocated by

re spor dent .

Legislative History S.ubports the Maiority Opinion

.Even if we ,were permitted tojcònsult the legislative history

of section 6330 (c) (2) to discern t he meaning of the relevant

term, the .legislative history sup orts interpreting the term in

accordance with its plain meaning

The history to section 6330,

- 22 as stated in the committee reports and as discerned from the

setting in which that section was enacted, reveals that Congress

intended that a taxpayer be allowed under that section to dispute

a tax liability underlying a proposed levy whenever the taxpayer

did not have a prior opportunity to dispute that liability either

through the receipt of a notice of deficiency or otherwise.

The enactment of section 6330 followed more than a year of

Congressional investigations and hearings over the future of the

Internal Revenue Service (IRS), resulting in highly publicized

criticisms of the agency's collection methods.

Mesa Oil, Inc. v.

United States, 86 AFTR 2d 2000-7312, 2001-1 USTC par. 50,130

Colo. 2000).

(D.

We know from the Senate report that the Senate

Finance Committee intended that section 6330 would establish

"formal procedures designed to insure due process where the IRS

seeks to collect taxes by levy".

1998-3 C.B. 537,

603.

S. Rept. 105-174, at 67

(1998),

We also know from that report that the

committee believed that the addition of section 6330 would afford

to taxpayers in dealing with the IRS rights which were similar to

the rights afforded to all persons in dealing with any other

creditor.

S. Rept. 105-174, supra at 67, 1998-3 C.B. at 603.

this end, the committee declared, the Commissioner would by

virtue of section 6330 need henceforth to "afford taxpayers

adequate notice of collection activity and a meaningful hearing

- 23 befo e the IRS deprives them of their property."

Id.

.The

comm .ttee believed that these prpcedures would "increase fairness

to t xpayers."

Id.

The history of section 6330 (c) (2) .also reveals that the

Admirlistration had during the .legislative process' voiced its

concèrn to two . Members . of Congress that_ the 042 relevant term

incl ded self-assessed liabiliti s and that those liabilities

should not be included within th

breadth of that section.

See

letter from L. Anthony Sutin, Act ing .Assistant Attorney General,

to the Hon. William V. Roth, .Jr., Chairman, Committee .on Finance,

U.S. Senate, and the Hon. Willian Archer, Cha$rman, Committee on

Ways and Means, U.S. House of Representatives

reprinted in Tax Notes Today,. 98 T T 11N-41

(June 8, 1998),

(Ju e 11, 1998);

letter from Robert E. Rubin, Secr tary of the T easur , to the

Hon. William Archeri Chairman, Committee oÊ Ways and Means, U.S.

House of Representatives

Today

98 TNT 112--40

(June 2,

1998), reprinted in Tax Notes

(June 11, 1998); cf. Statement of

Administration Policy, Office of

anagement and Budget (May 5,

1998), reprinted in Tax Notes Today, 98 TNT 87-18

(May 6, 1998) .

The Acministration wrote those le ters after the Senate passed

the Sénate's version of section 6 30, H.R. 2676, sec. 3401(b),

105th Cong., 2d Sess.

(May 5, 1998), but before the conference

committee amended that version to read as enacted.

conferees, however, opted not to

'Î'h

hange the relevant term to

- 24 address the Administration's stated concern.

The Senate version

of section 6330(c) (2), see id., 144 Cong. Rec. S4163 (daily ed.

May 4, 1998), provided (emphasis added):

SEC. 6330 (c) (2).

Issues at hearing.--The person

may raise at the hearing any relevant issue relating to

the unpaid tax or the proposed levy, including-(A) challenges to the underlying tax

liability as to existence and amount.

(B) appropriate spousal defenses,

collection actions, and

(D) offers of collection alternatives,

which may include the posting of a bond, the

substitution of other assets, an installment

agreement, or an offer-in-compromise.

Section 6330 as enacted provided (emphasis added):

SEC. 6330(c) (2).

Issues at hearing.

(A) In general.

The person may raise at the

hearing any relevant issue relating to the unpaid tax

or the proposed levy, including

(i) appropriate spousal defenses;

(ii) challenges to the appropriateness

of collection actions; and

(iii) offers of collection alternatives,

which may include the posting of a bond, the

substitution of other assets, an installment

agreement, or an offer-in-compromise.

(B) Underlying liability. The person may also

raise at the hearing challenges to the existence or

amount of the underlying tax liability for any tax

period if the person did not receive any statutory

notice of deficiency for such tax liability or did not

otherwise have an opportunity to dispute such tax

liability.

- 25 As t<

the emphasized language, t e conference report> states:

The conference agreeme t includes a modified form

of the Senate amendment . The IRS would be required to

provide the taxpayer with a "Notice of Intent to .Levy, "

formally stating its intention to collect a tax

liability by levy against t le taxpayer's property or

rights to property.

* * *

* * * In general, any issue that is relevant to the

appropriateness of the proposed collection against the

taxpayer can be raised at tl e pre-levy hearing.

For

example, the taxpayer can .r quest innocent spouse

status, make an offer-in-coinpromise, request an

installment, agreement . or suc)gest, which as sets ,should be

used to satisfy the tax lia ility. However, the

validity of the tax .liabi.lity cann be challenged only. if

the taxpayer did not actualÄy receive the statutory

notice of deficiency or has (not otherwise had an

opportunity to. dispute the iability. [H.. orÍf. Rept.

105-599, at 265 (1998), .1998 3 C.B. 1019; emphasis

added. ]

The conferees' use of the term "tax liability" in both 'places is

consistent with a plain meaning application and is inconsistent

with

he position taken by respondent i 1 this case.

OLEY, J., agrees with this concurring opinion.

- 26 GALE, J., concurring:

majority.

I agree with result reached by the

I write separately to address respondent's contention

that the legislative history supports an interpretation of

section 6330(c) (2) (B) that precludes a taxpayer's ability to

dispute a tax liability reported on the return (a self-reported

or "self-assessed" liability) in a section 6330 proceeding.

Assuming that the language of section 6330(c) (2) (B) contains

sufficient ambiguity to justify resort to the legislative

history, that history offers little support for respondent's

position and indeed suggests the contrary.

Section 6330 originated in section 34.01 of the Senate

version of H.R. 2676, the bill that, after amendment, was enacted

as the Internal Revenue Service Restructuring and Reform Act of

1998, Pub. L. 105-206, 112 Stat. 747.

The predecessor of section

6330(c) (2) (B) in the Senate version provided without limitation

that a taxpayer could raise in a section 6330 proceeding

"challenges to the underlying tax liability as to existence or

amount".

H.R. 2676, sec. 3401(b), 105th Cong., 2d Sess.

144 Cong. Rec. S4163

(daily ed..May 4,

(1998),

1998).

The expansive Senate version provoked a critical response

from the Treasury Department and other representatives of the

executive branch concerned with its overbreadth.

An OMB

Statement of Administration Policy issued after the Senate

Finance Comhittee reported the Senate version, and a letter from

.27 the Preasury Secretary sent to t e .Chairman of the House Ways &

Mean¼ Committée (after Senate passage, with respect to the HouseSenat e conference on the legisla ion), both sidentified two

prinÄipal concerns of overbreadt ; namely, that under the Senate

versjon a taxpayer could dispute

in a section .6330 proceeding,

(i) t ax liabilities that had bee

previously litigated or (ii)

tax liabilities that had been self-assessed.

See Statement .of

Admir istration Policy, Executivé Office of the President

(Office

of Management:and Budget), on H.R. 2676.-..Internal Revenue

Service Restructuring and Reform Act (Reported. b

the Senate

Committee on Finance) (May 5, 1998),1 reprinted in Tax Notes

Today,

98 TNT 87-1-8

(May 6, 1998)

letter from Robert<E. Rubin,

Sed etary of the Treasury to William Archer, Chairman, Committee

The OMB Statement of Administration Policy states:

Iowever,

some of the new.procedural provisions in the

reported bill· may unintentio ally make it easier for

r1oncompliant taxpayers to avoid paying their fair share

c>f taxes.

For example, tthe ill would allow additional

tppeals' and court challenges before the IRS can collect

t ax from a taxpayer who refuses to pay., even if the

t axpayer has -voluntarily self,assessed the amount due

r a court has held that the taxt>aver owes the tax.

[Emphasis. added.]

- 28 on Ways & Means, U.S. House of Representatives

(June 2, 1998),2

reprinted in Tax Notes Today, 98 TNT 112-40 (June 11, 1998).

The final version of the legislation devised by the

conference committee added the following (emphasized)

limiting

language in section 6330(c) (2) (B):

SEC. 6330(c) (2).

Issues at hearing.

(B) Underlying liability. The person may also

raise at the hearing challenges to the existence or

amount of the underlying tax liability for any tax

period if the person did not receive any statutory

notice of deficiency for such tax liability or did not

otherwise have an opportunity to dispute such tax

liability. [Emphasis added.]

I would submit that it is clear that the conferees, in adding

this limiting language to the statute, intended to address the

expressed concern about a taxpayer's ability to dispute

previously litigated tax liabilities in a section 6330

proceeding.

The new language is directed specifically at a

taxpayer's previous opportunities for dispute, either by having

been afforded an opportunity for a deficiency proceeding or

2 Treasury Secretary Rubin's letter states:

The Senate bill provides taxpayers with additional

advance notification and appeal rights prior to levy

* * *.

* * * The appeal right in. levy cases would

enable taxpayers to litigate the same tax liability

repeatedly * * *. The provision would change the

entire collections process, includina the process for

many taxpayers who have self-assessed their tax

liability but not paid in full * * *. [Emphasis added.]

- 29 othe wise -(as, 'foi. example, - ïn the case of··taxes not eligible for

defi iency proceedings) f

But on

can:not as readily infer from..·.

the statutory modifications an intention. .to foreclose

consÁderation of self-assessed liabilities in a section 6330 procèeding.

The report of the conference committee is similarly

opaqt e, lacking any specific indication that the conferees

inter ded to address the concern expressed about allowing

taxpåyers to dispute self-assess d liabilities in a section 6330

proc eding.

The only reference in the report to the newly added

limiting language of the statute is a single sentence that

closely tracks the statute.

In general, any issue that is relevant to the

appropriateness of the propÄsed collection against the

taxpayer can. be raised at tl e pre-levy hearing. * * *

However, the validity of th tax liability can be

challencred only if the taxpÅver did not actually

receive the statutory notice.of deficiency or has not

otherwise had an opportunity to dispute the liability.

[H. Conf. Rept. 105-599, at 265 (1998), 1998-3 C.B.

747, 1019; emphasis added.]

These aspects of the legislative history, rather · than

offering any support for respondent's position, give rise to a

negative inference concerning. Cor gress's intention to foreclose

review of self-assessed liabilit es in section 6330 proceedings.

Havin

been advised of the executive branch's concern about

allowing taxpayers to dispute self-assessed liabilities in

secti n 6330 proceedings, the cor ferees' failure to refer to

self-assessed amounts when modif ing the provision at issue, in

- 30 either the statute itself or the conference report, suggests that

they chose not to address this particular concern.

SWIFT,

LARO,

FOLEY, MARVEL, and WHERRY,

concurring op1nlon.

JJ.,

agree with this

31 MARVEL, -J. , concurring:

I agree with the majority that

respondent's motion for summary

case

udgment must be denied in this

There are several reasons for doing so, including the

reas ns set forth in the majori'ty op1næon.

I believe, ,however,

that the facts of th1s .case ralse 'a ser.1ous factual issue as to

whet er the taxpayers receivèd the hearing mandated by section

6330

and on this ground alone, I would deny respondent's motion.

The majority opinion*states that, on April 18, 2002,

petitioners submittèd a request for an administrative hearing.

In t e ·letitèr accompanying the request, -petitioners'

representative advised the Internal Revenue Service that

petitioners intended to file an amended income tax return to

"more appropriately report the e ercise of the incentive- and

nong alified stock options" that gave rise to petitioners' unpaid

tax liability for 2000.

Petitioners' representative -also

challenged the appröpriateness o

the proposed levy, indicated

that the levy would cause irreparable harm to.petititoners, and

stated that there Were réasonable collection alternatives s

Appeals OfficeF Jöhnsòn had a cònversation with petitioners'

representative on July 22, 2002, in which he agreed that

petitioners would be:permitted to submit the amended return, but

he di

not set any deadline for'doing so.

On September 26,. 2002,

without any further notice to petitioners and apparently without

.hold ng the reghired hearing, the Appeals Office issued to

- 32 petitioners a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330.

These facts raise a material issue of fact regarding whether

or not petitioners received the hearing to which they were

entitled under section 6330.

Section 6330 requires that a

taxpayer who timely requests a hearing receive a hearing.

this case, petitioners were not only challenging the underlying

tax liability, but they were also challenging the reasonableness

of the proposed levy and had clearly stated their desire to

explore collection alternatives at the section 6330 hearing.

The

issuance of the notice of determination without any warning to

petitioners and without any hearing deprived petitioners of the

opportunity to present, and receive a determination on, all

relevant issues as required by section 6330(c) (2) and (3).

If, instead of precipitously issuing the notice of

determination, the Appeals Office had notified petitioners that

it was rescheduling the hearing that was originally scheduled for

July 25, 2002, petitioners would have had fair warning and could

have prepared to present all of their issues at the hearing,

including those related to the underlying tax liability.

As it

turned out, petitioners submitted their amended return,

reflecting that they were due a refund of $519,087, on October

11, 2002.

Taxpayers who assert that they intend to file an amended

retu n for .the first -time iñ connection with a hearing under

sect LOn 6320 or 6330 should not .take solace from the ,majority

opin LOn.

The majority opinion addresses a.case in which the

042

peti ioners: apparently demonstrated to the Appeals Office that

they were serious about filing an amended return, and .that they

had

ubstantial reasons for doing so, because the Appeals Office

agreèd to give~petitioners time to file their amended return.

taxpäyer who procrastinates and seeks to rely solely-on his .

annotinced intent!ion to file an amended return as a defense, to a

propc sed levy or lien in a section §320/6330 hearing or in a

section .6320/6330 proceeding before this Court proceeds at his

peril as his undocumented intent Lon is not likely to be viewed as

a cre dible challenge to the unde clying tax liability.

HAINES, GOEKE,

opin on.

and· WHERRY,

JJ.

agree with this concurring

- 34 -

GOEKE, J., concurring in result:

I agree with the result

reached by the majority and its interpretation of the term

"underlying tax liability".

I write separately to clarify the

significance of petitioners' amended return.

Under section 6330(c) (2) (B), petitioners were permitted to

raise at the hearing challenges to the existence or amount of

their underlying tax liability.

Petitioners raised a challenge

to the amount of their underlying liability and the parties

agreed that petitioners would be permitted to submit an amended

return reflecting their position.

The Appeals officer abruptly

issued the notice of determination.

Petitioners subsequently

submitted an amended return.

I believe that if petitioners had

been given a reasonable opportunity to challenge the amount of

their underlying liability during the hearing process

(e.g., by

filing an amended return) and they had failed to do so, then we

should not review the underlying tax liability because it was not

properly raised at the hearing, but in this case they were not

given the opportunity to challenge their underlying liability, so

the hearing was inadequate.

This situation is analogous to offers in compromise

(OIC).

Before an OIC can be considered, the taxpayer must submit current

financial information.

Moorhous v. Commissioner, T.C. Memo.

2003-183; see also Rodriguez v. Commissioner, T.C. Memo. 2003-153

(finding that the Appeals officer did not.abuse his discretion in

- 35-.not considering OIC where all .required returns had not been

filed) .

Without this information, the Appeals; officer cannot

prop fly^ consider the OIC. , Likewise; a taxpayer desiring to ,

chall:enge the existence or amount of..the underlying tax liability

who has not previously filed an amended return should-generally

be required to file an amended return in conjunction with the

hear ing if such amended return is reques.ted by the. Appeals

offi er in' order to satisfy the requirement that the liability be

at i sue at the hearing.

Although petitioners' amended return ref-lects that they are

due á refund of $519,08'7A,

I*do not interpret the majority as

implýing that we have the authori.ty to order a refund if

petit ioners establish that they have ove.rpaid their 2000 taxes.

Our jurisdiction under section 6330 .is limited to deciding

whetlier respondent can proceed with .the proposed collection

actic>n.

Accordingly, we would need only decide .whether

petifioners' 2000 tax liability rs equal to or less than the

amourit they previously paid for the· year.

HAINES and WHERRY, JJ., agree with this concurring opinion.

- 36 GERBER, J., dissenting:

the holding of the majority.

With due respect,

I dissent from

I agree that the majority's literal

reading of the phrase, "underlying tax liability", is one

possible way to interpret that phrase.

It is my view, however,

that the phrase "underlying tax liability", when considered in

the context of section 6330 and specifically in context of

section 6330(c) (2) (B), could also be read to not include a tax

liability that a taxpayer has reported and admitted was owing.

The intent of the statute was to give a taxpayer the right

to challenge the "underlying tax liability * * * if the

[taxpayer] * * *

.did not otherwise have an opportunity to

dispute such tax liability."

Sec. 6330(c) (2) (B) (emphasis added).

That phrase should not be interpreted to mean that a person could

contest their own judgment as to the correct tax.

The

opportunity to contest tax liabilities is, without exception,

granted by statute.1

If a person files a tax return and self-

assesses or admits to owing a tax liability, but fails to pay the

admitted liability, the statutory opportunity to contest such

liabi'lity has traditionally been through a refund suit.2

1 It is well established that the United States is immune

from suit except where Congress by specific statute has waived

its sovereign immunity. See, e.g., United States v. Sherwood,

312 U.S. 584, 586 (1941).

2 We must distinguish the circumstances we consider from

deficiency proceedings where we have authority to consider

overpayments.

See sec. 6512(b). A proceeding under section 6330

(continued...)

- 37 Norm lly, with respect to an inc me ·tax'liability, the right to

sue

or a refund requires full payment of the disputed liability.

Unde

the majority's reading of section 6330 (c) (2) (B), there

would be no such requirement for payment prior ;to being able to

contèst the underlying merits of a self-assessed amount in the

contêxt of a section 6330 hearing before this Court.

The majority's interpretation results in -a dramatic and

imprcbable change from more than 75 years of established tax

litiçation procedure and precedemt.

If Congress had -intended

such a dramatic change, it certa...nly would have made some

reference or modification to the existing statutory framework for

refund claims and/or suits.

Finally, I findv it~ inconceivable. that Congress intended that

taxpayers who filed returns· admitt=ing that they owed tax are to

042 be given the opportunity to contest their own "assessment" of the

tax due, when the respondent see s to collect it..

It is my view

that Congress intended to ensure that taxpayers had certain

rights with respect to the collect'ion þrocess and to permit, them

to contest any changes respondent propbsed,

if tthey had not

alrea:ly had the opportunity to do so.

HIECHI, _J., ,agrees with thfs dissenting op1nlon.

( . . . continued)

is not a deficiency proceeding.

Including respondent's proposed changes from a taxpayer's

self- ssessed tax liability.

- 38 HALPERN,

, dissenting:

Introduction

I cannot agree with the majority that the term "underlying

tax liability", as used in section 6330 (c) (2) (B), is.to be

interpreted "as a reference to the amounts that the Commissioner

assessed for a particular tax period."

Majority op. p. 11.

What

I believe to be a mistaken interpretation of the term leads the

majority to a "plain language" reading of section 6330(c) (2) (B)

that would allow a taxpayer, at a section 6330 hearing, to

challenge the Government's right to collect from her the portion

of any tax that she had reported but failed to pay.

The meaning of the term "underlying tax liability" in

section 6330(c) (2) (B) is ambiguous.

Because it is ambiguous, we

are entitled to examine extrinsic evidence to discern its

meaning.

The legislative history of section 6330(c) (2) (B) leads

me to agree with respondent that, as used in that section, the

term "underlying tax liability" refers to liabilities asserted by

the Commissioner that differ in amount from liabilities selfassessed by the taxpayer.1

I conclude, therefore, that, at a

section 6330 hearing, a taxpayer may not challenge the

Government's right to collect from her any reported but unpaid

tax.

For the reasons stated, I dissent.

1 The term "self-assessed" is somewhat of a misnomer in

that tax reported on a return is actually assessed by the

Commissioner.

See sec. 6201(a) (1).

I use the term in the

colloquial sense.

II.

Section 301.v6330-1(e), Proced. & Admin. 4Regs.

Before proceeding, it is necessary to comment on .the

inajo2 ity s disposition of section 301..6330-1(e),

Proced. & Admin.

Regs , set forth in pertinent part on page +9 of the majority's

opin on.

Subsection (e) (1) . of that regulation states quite

clea ly that, at a section 6330 (Collection -Due Process

hearing), the taxpayer "may,rais

(CDP)

challenges to the existence or

amour t of the tax liability specified ion the CDP Notice * * *« if

the t axpayer did not receive a statutory. notice of .deficiency for

that tax liability or did not otherwise have an opportunity ,to

dispute that tax liability." ,(Eruphasis added.)

subs ction (e) (3); Q&A-E2

(similar).2